Understanding the Function of Insurance
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Questions and Answers

What is the major function of insurance?

  • Ensuring that everyone pays the same premium
  • Achieving a spread of risk (correct)
  • Providing financial assistance to the insured
  • Guaranteeing profits for the insurance company

    • How does insurance contribute to the basis of credit system?

  • It creates more risk for lenders
  • It frees up credit and protects the investments of lenders (correct)
  • It restricts consumer access to credit
  • It increases uncertainty for lenders

    • What is one of the benefits of insurance in relation to worry and entrepreneurship?

  • It allows people to cover large uncertain future losses and reduces anxiety (correct)
  • It eliminates the need for insurance altogether
  • It increases anxiety about future losses
  • It discourages entrepreneurship

    • What role do insurers play in terms of employment and investment capital?

    <p>Insurers are major employers and investors, employing over 100,000 people</p> Signup and view all the answers

    How is risk defined in the context of insurance?

    <p>The danger or hazard of a loss of the property insured</p> Signup and view all the answers

    What is the other name for 'property and casualty' insurance?

    <p>General insurance</p> Signup and view all the answers

    Which type of insurance provides protection when insureds are financially responsible for injury or damage they cause to others?

    <p>Liability Insurance</p> Signup and view all the answers

    Which type of insurer is owned by its policyholders, with the main goal to provide policyholders with insurance at as low a cost as possible?

    <p>Mutual Companies</p> Signup and view all the answers

    What is the most common method used by insurers to sell their products?

    <p>Direct Writing System</p> Signup and view all the answers

    Which type of insurer's ownership rests in the shareholders, whose main purpose is to derive profit from their investments?

    <p>Private Insurers - Stock Companies</p> Signup and view all the answers

    Which type of insurer involves federal and provincial governments in providing various insurance plans?

    <p>Government Insurers</p> Signup and view all the answers

    Which system involves the brokerage being paid a commission by the insurer on all the business it writes?

    <p>Independent Brokerage System</p> Signup and view all the answers

    What is the primary incentive for stock companies in providing insurance?

    <p>To derive profit from their investments</p> Signup and view all the answers

    What does liability insurance provide protection for?

    <p>Injury or damage caused to others by insureds</p> Signup and view all the answers

    Which type of insurance represents more than 50% of all property and casualty premiums in Canada?

    <p>Automobile Insurance</p> Signup and view all the answers

    What is the primary purpose of insurance, as described in the text?

    <p>To spread the losses of the few among the many</p> Signup and view all the answers

    Which aspect is NOT identified as an important point in the analysis of the definition of insurance?

    <p>Contribution to Loss Prevention and Loss Reduction</p> Signup and view all the answers

    What is one of the benefits of insurance in relation to worry and entrepreneurship?

    <p>Reduction in anxiety about future losses</p> Signup and view all the answers

    Which type of insurer's ownership rests in the shareholders, whose main purpose is to derive profit from their investments?

    <p>Stock Insurance Company</p> Signup and view all the answers

    What does liability insurance provide protection for, according to the text?

    <p>Protection against financial responsibility for injury or damage caused to others</p> Signup and view all the answers

    How does insurance contribute to the basis of credit system, as mentioned in the text?

    <p>By freeing up credit and protecting lenders' investments</p> Signup and view all the answers

    Which type of insurance represents the second largest source of premiums to insurers?

    <p>Property Insurance</p> Signup and view all the answers

    What other name is given to the area of insurance known as 'property and casualty (P&C) insurance'?

    <p>General Insurance</p> Signup and view all the answers

    Which system involves the brokerage being paid a commission by the insurer on all the business it writes?

    <p>Independent Brokerage System</p> Signup and view all the answers

    What is the primary incentive for stock companies in providing insurance?

    <p>Profit Maximization</p> Signup and view all the answers

    Which type of insurer is owned by its policyholders, with the main goal to provide policyholders with insurance at as low a cost as possible?

    <p>Mutual Companies</p> Signup and view all the answers

    Which type of insurance provides protection when insureds are financially responsible for injury or damage they cause to others?

    <p>Liability Insurance</p> Signup and view all the answers

    What type of risk is defined in the context of insurance?

    <p>Pure Risk</p> Signup and view all the answers

    Which type of insurer's ownership rests in the shareholders, whose main purpose is to derive profit from their investments?

    <p>Private Insurers (Stock Companies)</p> Signup and view all the answers

    What is one of the benefits of insurance in relation to worry and entrepreneurship?

    <p>Economic Stability</p> Signup and view all the answers

    What does liability insurance provide protection for?

    <p>Injury or damage caused to others</p> Signup and view all the answers

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